We estimate the determinants of job satisfaction testing the prediction that the labor market generates equalizing differences associated with flexible contracts. As Hamermesh (2001, 2) puts it, job satisfaction is the only measure "that might be viewed as reflecting how (workers) react to the entire panoply of job characteristics" and as such "it can be viewed as a single metric that allows the worker to compare the current job to other labour market opportunities." Thus, job satisfaction measures allow a summary worker evaluation of the consequences of flexible employment contracts. (1) If such contracts consistently associate with large negative job satisfaction differentials, it becomes more difficult to argue for a hedonic or equalizing differences view of this aspect of the labor market. Yet, even in the presence of large job satisfaction differentials, it may be the case that workers in flexible contracts trade off lower job satisfaction for higher satisfaction in other aspects of life such as fulfilling family responsibilities, undertaking education, or arranging leisure activities. Examining overall life satisfaction tests the influence of flexible contracts on well-being in a framework that accounts for these potential trade-offs as well as the equalizing differences that may happen within the labor market.

This article estimates the relationships between a variety of flexible employment contracts and a range of dimensions of job satisfaction: job security, pay, hours, the work itself, and overall. Moreover, by controlling for worker fixed effects, we provide the first estimates that potentially account for sorting across the variety of employment contracts. By also estimating the determinants of life satisfaction, we provide evidence on whether flexible contracts may be associated with offsetting benefits outside the realm of work. Our evidence provides a counterbalance to earlier research (Beckmann et al. 2007; Booth et al. 2002; D'Addio et al. 2007; De Graaf-Zijl 2005a). Flexible contracts play at most a minor role in diminishing job satisfaction and this role is limited to diminishing satisfaction with job security. Moreover, flexible contracts play no role in diminishing overall life satisfaction among the employed. These results appear broadly supportive of labor markets generating equalizing differences for flexible contracts.

The next section discusses predictions and evidence about the relationship between flexible contracts and job satisfaction. The third section presents our data and testing methodology. The fourth section presents the initial results contrasting the cross section and fixed effects estimations. The fifth section presents extensions focusing on the role of job security and using measures of life satisfaction. The sixth section presents the conclusion.

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